Harvard’s study of
high-cost Medicare patients offers insights into how medical laboratories can
help improve early diagnosis, optimize therapies, and monitor chronic disease
Clinical laboratories and anatomic pathology groups supporting Medicare patients understand that a small portion of high-cost patients make up the majority of Medicare spending. Between extended treatment, comorbidities, and the complex nature of disease therapies, chronic illnesses have a major impact on healthcare costs—both in terms of spending and labor reductions.
Thus, a recent Harvard Medical School study published in Health Affairs which attempts to identify the contributing causes of spending on high-cost Medicare patients will be of interest to medical lab managers and stakeholders who can develop innovative diagnostic testing services that help physicians diagnose these diseases earlier and more accurately. They then could guide physicians to select the most appropriate therapies and help physicians monitor disease conditions.
High-Cost Patients
Eligible for Both Medicare and Medicaid
According to Jose Figueroa, MD, co-author of the Harvard study, “28.1% of patients who were high cost in 2012 remained persistently high cost over the subsequent two years. On average, persistently high-cost patients were younger, more likely to be members of racial/ethnic minority groups, eligible for Medicare based on having end-stage renal disease, and dually eligible for Medicaid, compared to transiently and never high-cost patients.”
Studying a 20% sample of Medicare fee-for-service
beneficiaries in a period from 2012 to 2014, Figueroa and researchers from the Harvard T. H. Chan School of Public Health
and Harvard Medical School identified nine chronic conditions most prevalent in
patients identified as persistently high cost.
Out of a sample of 5,507,218 patients, the top conditions
found to contribute to persistent high costs included:
Might these findings represent an opportunity to medical
laboratories, anatomic
pathologists, and other members of the diagnostics industry? As early
detection is key to minimizing the cost of treatment and care, the ability to accurately
and rapidly detect these chronic diseases would be a major boon to clinical labs
and the physicians and healthcare facilities they support. Laboratories also could
find opportunities guiding therapy decisions and monitoring the progress of
treatments.
While improved testing for these chronic conditions could
reduce costs and improve quality of care, they also represent significant
revenue opportunities with one of the largest payers in the nation.
Impact of Chronic Disease
on Medicare’s Battle to Reduce Cost
“Medicare patients in the top 10% of spending each year
accounted for almost 20% of Medicare’s overall spending during the three-year
period covered by the study,” notes Fierce Healthcare.
“We found that 28.1% of Medicare beneficiaries who were high cost in a designated index year remained persistently high cost for all three years,” states Jose Figueroa, MD (above), Instructor of Medicine at Harvard Medical School and co-author of the Harvard study. “Despite being slightly less than 3% of the Medicare population, these persistently high-cost patients accounted for nearly 20% of total Medicare spending across the three–year period we studied.” (Photo copyright: Brazosport Independent School District.)
Across the period, mean yearly spending for never-high-cost
patients was only $5,206 per person. The mean yearly spending per person for persistently
high-cost patients averaged $69,793—an increase of more than 1,240%!
Figueroa told Fierce
Healthcare he believes policy changes are key to reducing costs for
patients with chronic health conditions. He cites inadequate housing, reduced
access to healthy foods, reduced mobility, and ease of transportation to and
from care providers as potential reasons for the racial and ethnic disparities
highlighted in his findings.
The Harvard study notes that few of the expenses incurred by
persistently high-cost patients are preventable through alternate treatment. For
most, outpatient care and drug spending make up a large part of those expenses.
And, as the study points out, younger patients with chronic diseases stay persistently
high cost for longer periods.
Clinical laboratories that help develop and implement
diagnostics aimed at early detection could help reduce long-term spending as
well—particularly in relation to patients with multiple chronic conditions.
Opportunities for
Clinical Labs Covered at 2019 Executive War College
The opportunity for medical labs to help with early
detection and effective treatment of Medicare patients with one or more chronic
conditions was a major topic at this year’s Executive War College on Laboratory
and Pathology Management that took place in New Orleans last week.
There also were presentations on how clinical laboratories
can help physicians and health plans identify undiagnosed patients. For
physicians, this means more revenue as risk adjustment payments are increased
for these newly-diagnosed patients. For health insurers, the ability of labs to
identify undiagnosed patients means that the insurers can close care gaps and
improve the patient outcomes produced by their health plans.
As drug costs are a major source of Medicare expenses in persistently
high-cost patients, helping physicians target therapies with innovative
diagnostics could further lower costs by ensuring the ideal medication is used
alongside inpatient or outpatient services.
And, by offering diagnostics monitoring services, clinical labs
could help providers better manage complex treatments of those with multiple
chronic conditions and ensure treatments bring the intended results.
Sonic’s data-driven
approach to population health management, based on helping clinicians intervene
with patients to control healthcare costs, increases the lab’s revenue
Using integrated financial and clinical analytics, Sonic is
developing technologies to build clinical
decision support tools for its provider and health plan clients. The
providers and health plans use those tools to engage patients and help them
manage their health.
“We are getting paid for contracting strategies beyond fee-for-service,” Sonic’s Chief Strategy Officer Phil Chen, MD, PhD, told the 875 attendees at the 24th Annual Executive War College (EWC) in New Orleans, one of the largest crowds in the history of the event. In his presentation, Chen outlined value-based contracting strategies that Sonic uses to share savings with its healthcare provider clients.
Identifying Low-Cost
Patients Who May Become High-Cost Patients
“Follow the people, follow the money,” Chen said. During his
presentation, he explained how Sonic uses lab test results and financial data
to show providers how some low-cost patients over time can become high-cost
patients. And how Sonic uses lab test data to help physicians identify low-cost
patients who may need certain interventions before they become high-cost
patients.
Providers have opportunities to intervene with patients who have renal failure, congestive heart failure, ischemic heart disease, diabetes, and other conditions, Chen said.
“Why do some people in the low-cost categories jump into the
high-cost category?” he asked. Lab test data offer clues, he suggested.
In his presentation at the 24th Annual Executive War College (EWC) in New Orleans, Sonic Healthcare’s Chief Strategy Officer Phil Chen, MD, PhD (above), explained how his lab has a data-driven approach to population health management. The strategy, he says, allows clinicians to intervene as needed with patients to improve their health and to control healthcare costs. (Photo copyright: DARK Daily.)
Over several years, Sonic has worked with one client
provider group to identify patients who would benefit the most from
interventions to prevent their healthcare costs from rising sharply. For a
health plan with 75,000 lives, Chen showed how Sonic tracked the cost of
patients from one to the next. “The goal is to find out who are the patients
who consume high healthcare cost, but may benefit from early intervention,” he
said.
Sonic found that about two-thirds of high-cost patients were
in the low-cost group just one year earlier. “We then focused on this subset
trying to determine the reasons they transitioned from low to high cost,” he
explained. “We found that the reason they were low cost the year before was not
because they were healthy. Instead, it was because they did not engage with the
healthcare system for their chronic disease management.”
Therefore, their treatment costs were low. But when they entered the healthcare system in the following year, their costs rose sharply, he said. Sonic used its iMorpheus data analytics system to show that 26.5% of the low-cost patients had diabetes, but that they had not seen their physician in the previous 12 months.
Partnering with
Health Plans Increases Patients’ Visits
When Sonic explained to its health plan client that the
health plan needed to contact those patients to ensure they would get the care
they needed, the health plan administrator told Sonic the health plan didn’t
have the resources to do the work. Instead, the health plan expected Sonic to
contact the patients. The administrator told Sonic, “You need to do it because
I need a healthcare partner,” Chen said.
Sonic did not have the staff to call those patients either. So,
the company developed an automated interactive voice response system to call the
patients. Sonic recorded the patients’ physicians and then had the system place
the calls. Of the patients who received the calls, 44% responded and visited
their physicians.
For this ACO, Sonic used its pathology and laboratory
informatics system to integrate clinical and claims-based financial risk
assessment data. As a result of Sonic’s work, the ACO’s payments from Medicare
rose from $12.8 million one year to $26 million the next. As a result, Chen
said, “We got a nice check for the work we did for this ACO.”
When negotiating an effective Part A contract for professional pathology services, the best approach is to structure an agreement that is fair and reasonable to both the hospital and the pathologist. That’s the advice given by Robert Tessier, Senior Reimbursement Consultant, HBP Services, Inc. in an interview with Dark Daily.
In his position with the Woodbridge, Conn.-based management consulting firm, Tessier advises hospitals on their contracts with pathology groups (HBP stands for Hospital-Based Physician). However, he also helps pathology groups manage negotiations with healthcare providers for their Part A service agreements.
“Your pathology group can ultimately come up with the best
package of options for all parties involved. It’s a strategy of win-win,” he said.
“It’s not strictly what you get on behalf of the pathology group, but also what
is negotiated that is fair and reasonable to the hospital, along with contract terms
that everyone feels are mutually acceptable.”
HBP has compiled detailed data on pathology and fair market
value, as well as new at-risk incentives. It’s the type of information pathologists
should gather at least six months in advance of contract negotiations with
hospitals and health networks.
“Pathologists want to keep what they have been able to
achieve over the years, and the hospital wants more for the bottom line. They generally
spend little time evaluating what is fair and reasonable for both parties,”
Tessier said.
So, what is considered a “fair and reasonable” pathologist’s
hourly rate? Under Medicare’s 2014 Final
Rule CMS-1607-F, the reasonable
compensation equivalent (RCE) limit
for physician services is currently set at $125/hour or $260,300 a year.
“So, while hospitals are enamored with using that number as
a ceiling, we have to let pathologists know it is simply guidance. And, it has
to be brought forward to the cost of living in 2019,” Tessier noted. He added
that $150/hour currently mirrors fair-market-value studies and reflects the
“sweet spot” for a pathologist’s hourly pay for Part A services.
Additionally, to prepare for time studies that providers may
request, Tessier advises pathologists to compile two two-week time studies per
year that offer a reliability factor of about 95%. Based on current market data,
for example, pathologists can reasonably expect to receive $1,500 to $1,800 for
an autopsy.
Brush Up on New
Contract Terms for Pathology Part A Agreements
In addition to fair market value, hospital attorneys also
aim for “commercial reasonableness.” For example, they assess a pathology practice’s
Part A support and ability to bill professional component clinical pathology,
according to Tessier.
“If a practice bills 10% to 15% of payers for overseeing
clinical laboratory operations, it can’t expect at the same time to be paid for
Part A provided to the same payers,” he explained.
Taking Risk
Incentives
Another trend in pathology Part A professional service agreements
is the inclusion of at-risk incentives. Tessier suggests adding “at-risk” metrics
that are supplementary to payments made to pathologists at the hourly rate.
“Hospitals now say, ‘Let’s come up with an incentive plan providing
opportunities for pathologists to demonstrate additional value.’ This is the
newest element in pathology contracting,” Tessier noted.
He suggests each pathologist may obtain a value-based
payment in addition to the annual Part A support. This incentive pay rewards
services such as reducing unnecessary lab tests, participating in outreach and
marketing activities, and ensuring effective blood bank utilization, among
others.
Experts also advise pathologists to remind healthcare
administrators about their medical laboratory’s value throughout the year—not wait
until contract negotiation time. Annual reports from the pathology group can inform
hospital C-suite executives on financial indicators and changes in the
operations.
Aim for Balance with
a Pathology Part A Hospital Agreement
Ultimately, successful pathology contracts are achievements
in balance, Tessier notes. Each party should be wary of getting too good a deal,
as well as unreasonable terms.
“Some say, ‘Let’s not bother to challenge something because we have a really good deal here.’ But good deals eventually disappear,” Robert H. Tessier (above) of HBP Services, Inc. cautioned. “Sometimes your pathology group may have to give up on today’s contract benefits if the agreement terms are not beneficial to both parties.” (Photo copyright: The Dark Intelligence Group.)
FDA cautions patients to not use data gained from the DTC test to make healthcare decisions on their own
Clinical laboratories continue to be impacted by the growing direct-to-consumer (DTC) testing market, as more walk-in lab customers order at-home tests. Now, the US Food and Drug Administration (FDA) has authorized a DTC test company to provide results of a pharmacogenetic (PGx) test to customers without needing a doctor’s order. This is the first genetic test of its kind to receive such FDA authorization and is in line with the government’s focus on precision medicine.
23andMe gained the authorization through the FDA’s de novo classification process, which the FDA uses to classify new devices that have no existing classification or comparabledevice on the market.
“We’ve continued to innovate through the FDA and pioneer safe, effective pathways for consumers to directly access genetic health information,” said Anne Wojcicki, co-founder and CEO of 23andMe, in a news release. “Pharmacogenetic reports are an important category of information for consumers to get access to, and I believe this authorization opens the door for consumers to work with their health providers to better manage their medications.”
However, some experts caution that informing patients
directly on how they metabolize medications based on genetic testing could
encourage them to bypass physicians and medical laboratories in the decision-making
process.
In a safety communication, the FDA alerted patients and
healthcare providers that “claims for many genetic tests to predict a patient’s
response to specific medications have not been reviewed by the FDA and may not
have the scientific or clinical evidence to support this use for most
medications. Changing drug treatment based on the results from such a genetic
test could lead to inappropriate treatment decisions and potentially serious
health consequences for the patient.”
Tim Stenzel, MD, PhD (above), Director, Office of In Vitro Diagnostics and Radiological Health at the FDA, told FierceBiotech, “This test should be used appropriately because it does not determine whether a medication is appropriate for a patient, does not provide medical advice, and does not diagnose any health conditions. Consumers should not use this test to make treatment decisions on their own.” (Photo copyright: LinkedIn.)
PGx Supports
Precision Medicine
Pharmacogenetics (PGx) is the study of how genetic differences among individuals cause
varied responses to certain drugs. Demand for PGx testing has increased
exponentially as it becomes more valuable to consumers. It could provide a path
to precision medicine treatment plans based on each patient’s genetic traits. And
help determine which drug therapies and dosages may be optimal and which
medicines should be avoided.
“This test is a step forward in
making information about genetic variants available directly to consumers and
better inform their discussions with their healthcare providers,” Stenzel told FierceBiotech. “We know that consumers
are increasingly interested in genetic information to help make decisions about
their healthcare.”
The genes and their variants examined in the 23andMe PGx
test are:
Innovative hospital and health networks also are starting to
make PGx tests available in primary care settings.
Sanford Imagenetics, part of the Sanford Health system, has produced a $49 laboratory-developed test (LDT) for genetic screening known as the Sanford Chip to help physicians select the most advantageous therapies for their patients. It uses a small amount of blood to identify patients’ risk for certain genetic diseases and determine which medications would be best for them.
Sanford Health, headquartered in Sioux Falls, SD, is one of
the largest health systems in the US with 44 hospitals, 1,400 physicians, and
more than 200 senior care locations in 26 states and nine countries.
Geisinger Health, headquartered in Danville, PA, has initiated a pilot project based on PGx testing. The genetic sequencing data from 2,500 patients will be reviewed to determine if they are taking the best medication for their health conditions. Patients in need of changes to their prescriptions will be contacted by Geisinger pharmacists for recommendations.
As consumer demand for PGx testing increases, DTC customers will
likely continue seeking new information about their genome. Clinical
laboratories could play a role in interpreting that data and assisting
pathologists and other healthcare providers determine the best drug therapies
for optimal health outcomes.
Experts blame insurance regulators for not ensuring the adequacy of healthcare networks that include hospital-based physicians, such as pathologists and radiologists
According to a recent study, clinical laboratories, anatomic pathologists, radiologists, and anesthesiologists top the list of providers who bill patients for the difference between what they charge for their services and a hospital’s contracted reimbursement rates.
This so-called “balance-billing” not only causes hardship for patients and consumers already shouldering a larger portion of their healthcare costs, but poses a public relations concern for service providers across the US healthcare industry as well.
Following public outcry from patients who received care at
what they believed to be in-network medical facilities, only then to be surprised
by bills from their care providers for the remaining balance not covered by
their insurance, the practice of balance billing has drawn increased scrutiny from
state and federal officials.
Medical Laboratory
Charges Top Reason for Surprise Bills
In their report, NORC notes that of those surveyed, 57% (567 individuals) acknowledged receiving a surprise medical bill they thought would be covered by their health insurance.
When asked about the network status of the doctor who
provided care during the episode related to the surprise bill, 79% responded
that charges were not for doctors being out-of-network for their insurance
plan. Medical laboratory-related charges were near the top of reasons patients
received surprise bills, with 51% of individuals receiving bills related to “a
laboratory test, like a blood test.”
Such surprise medical bills received frequent coverage in
2018. This has led many states to enact or discuss legislation to address the
practice and offer cost protections for patients.
Thus far, however, little change to existing regulations and
contract systems has been enacted to protect patients or help laboratories and
other service providers offer alternative payment solutions for patients.
There also are few requirements for insurance providers to verify
that plans include sufficient numbers of in-network service providers when
offering plans to consumers.
“Many news stories on ‘surprise’ billing blame physicians, because the bill is sent from the doctor’s office or billing company. But the insurance industry is the real culprit, in concert with insurance regulators who have not acted to require network adequacy,” R. Bruce Williams, MD (left), President, College of American Pathologists (CAP), and Geraldine B. McGinty, MD (right), Chair of the American College of Radiology Board of Chancellors, wrote in STAT. (Photos copyrights: College of American Pathologists/Geraldine McGinty.)
States Move to Change
Trends While Patients Continue to Experience Bill Shock
States are beginning to address surprise billing concerns ahead of action by insurance regulators and the federal government. In December, the Arizona Department of Insurance issued a news release outlining the agency’s plan to allow for arbitration questions for surprise out-of-network bills.
And, California effectively banned out-of-network billing from groups within in-network facilities in 2017 with Assembly Bill 72. However, the state only finalized reimbursement rates for service providers and patients affected by surprise bills in January of this year according to Capital Public Radio.
Many of these state-level regulations do not account for the complexity of creating rules based on emergency or non-emergency care or the insurance providers in question. For example, Assembly Bill 72 does not apply to “Medicare, Medi-Cal, out-of-state plans, self-insured employer plans, or other products regulated by federal law,” according to a news release from the California Society of Anesthesiologists.
Finding Fair
Solutions for Both Patients and Care Providers
Speaking with Kaiser Health News about a report of a man in Texas receiving a $109,000 surprise bill related to treatment after a heart attack, Rep. Lloyd Doggett of Texas said, “This is a nationwide problem, and we need a nationwide solution. We have a system where the patient, the most vulnerable person of all those involved, is caught between the insurer and the healthcare provider … these problems are solvable.”
Modern Healthcarerecently covered how some hospitals are now requiring physicians to go in-network as a provision of their contracts. However, they also note this approach disadvantages physicians and shifts reimbursement negotiation power to insurers. Should hospitals take a similar approach with medical laboratory specialists, it could create similar concerns.
While surprise medical bills create added hardship for
patients and pose reputational and reimbursement concerns for clinical laboratories
and healthcare providers, creating regulations that establish effective
protections while also protecting the financials of service providers continues
to prove difficult.
Speaking with Modern Healthcare, Dan Sacco, Vice President for Strategic Affairs and Payer Relations at Boca Raton Regional Hospital, summarized concerns concisely, saying, “We’re trying to protect [consumers], but we’re also trying to be reasonable business partners as well.”
Popularity of Medicare Advantage Plans fuels influx of new companies into the marketplace with anticipated enrollment of more than 22.6 million beneficiaries, or more than one-third of Medicare-eligible consumers
Continuing enrollment growth in Medicare Advantage plans is expected in 2019 and beyond. The projections are for double-digit percentage increases in Medicare Advantage enrollees. This is not auspicious for clinical laboratories and anatomic pathology groups because it means a shrinking proportion of Medicare beneficiaries remain in the Part B program.
Whereas any medical laboratory can provide services for any Medicare Part B beneficiary, that is not true for beneficiaries enrolled in Medicare Advantage plans. That’s because private health insurers operating Medicare Advantage plans typically contract with national lab companies while narrowing their lab networks, thereby limiting access to these patients by independent community laboratories, hospital lab outreach programs, and pathology groups.
Enrollment in Medicare Advantage is expected to reach record totals in 2019. More than 22.6 million new Medicare beneficiaries are anticipated, with 14 new private companies offering plans, Kaiser Health News (KHN) reports. As enrollment shifts from traditional Medicare to Medicare Advantage the health of regional clinical laboratories can suffer, as smaller labs lose access to beneficiaries.
Enrollment in
Medicare Advantage Plans Increases, Despite Cut in Funding
Because Medicare Advantage penetration varies across counties and states, some local laboratories may experience less of an impact from the growing popularity of Medicare Advantage plans than others. According to the Kaiser Family Foundation (KFF), Medicare Advantage plans attract less than 11% of eligible beneficiaries in Arkansas, Vermont and Wyoming. However, more than 41% of Medicare participants in Florida, Hawaii, Minnesota, and Oregon choose Medicare private health plans over Medicare Part B.
Although the Patient Protection and Affordable Care Act (ACA) cut federal funding to Medicare Advantage plans, the 2010 law ultimately did not cause insurers to exit states or leave the business altogether, as was predicted. Instead, enrollment in Medicare Advantage doubled to more than 22.6 million enrollees, growing from a quarter of Medicare beneficiaries to more than a third, between 2010 and 2019, KHN reported.
Bonus payments from the federal government to Medicare
Advantage plans that have quality ratings of four or more stars (on a one to five
scale) helped fuel the growth. Plans without ratings also are eligible for
bonus payments, which must be used to reduce cost-sharing or premiums or to
provide extra benefits.
Since 2010, enrollment in Medicare Advantage has doubled to more than 22.6 million enrollees, growing from a quarter of Medicare enrollees to more than one-third. This trend is not favorable to many clinical laboratories, as the private health insurers who operate Medicare Advantage plans often contract with the billion-dollar lab companies and exclude regional and independent medical laboratories as network providers. (Photo copyright: Kaiser Family Foundation, Centers for Medicare and Medicaid Services.)
“The Affordable Care Act did not kill Medicare Advantage, and the program looks poised to continue to grow quite rapidly,” Bill Frack, Managing Director with healthcare advisor L.E.K. Consulting, told KHN.
In total, 2,734 Medicare Advantage plans will be available nationwide to consumers in 2019, an 18% increase from 2018 (417 more plans). That’s the largest number available since 2009, KFF announced late last year in a report on the program’s growth. These numbers exclude employer or union-sponsored group plans and Special Needs Plans, which are only available to select populations.
The average Medicare beneficiary has access to 24 Medicare
Advantage plans in 2019, an increase from 21 last year and 19 from 2016-2017.
Profits Increase
While Premiums Decline
Medicare Advantage plans are attractive to seniors because
premiums, deductibles, and cost sharing typically are lower than government-run
Medicare Part B and because many plans include additional benefits such as vision,
dental, and prescription drug coverage and fitness programs.
In a press release, the Centers for Medicare and Medicaid Services (CMS) noted that the Medicare Advantage average monthly premium has continued to steadily decline, recording an estimated 6% drop in 2019 to $28, from an average of $29.81 in 2018. Nearly 83% of Medicare Advantage enrollees remaining in their current plan will have the same or lower premium in 2019. Approximately 46% of enrollees in their current plan will have a zero premium.
“The steps that the Trump Administration has taken to improve and drive competition in Medicare Advantage means more savings, more benefits and lower costs for seniors, CMS Administrator Seema Verma said in the press release. “[With the] popularity of programs, such as Medicare Advantage, and with the various new supplemental benefits and policy changes that have been adopted, we expect plan choices to be even more robust moving forward.” [Photo copyright: Centers for Medicare and Medicaid Services.)
Declining premiums, however, have not meant reduced profits
for Medicare Advantage plan administrators. Healthcare Finance recently reported
that UnitedHealth Group’s third-quarter earnings from operations grew $502
million, or 12.3%, year-over-year to $4.6 billion, with growth in the insurer’s
Medicare Advantage business claiming most of the credit for the higher numbers.
UnitedHealthcare’s Medicare Advantage plans served 525,000
more consumers year-over-year, with the purchase of a physician-owned Medicare
Advantage organization in Louisiana accounting for 65,000 of the total.
“These results reflect our businesses delivering increased value at an accelerating pace to society and the millions of people we serve—one person at a time,” David S. Wichmann, CEO of UnitedHealth Group, told Healthcare Finance.
While Medicare Advantage plan growth may be good news for insurers,
the outlook for anatomic pathology groups and medical laboratories is less
rosy. The proportion of Medicare beneficiaries enrolled in the Part B program
shrinks steadily. Meanwhile, payers’ increased reliance on narrow networks as a
way to rein in rising costs excludes many regional laboratories. Ultimately,
these developments threaten many in the clinical laboratory industry, not just
smaller laboratories, and underline the need for pathologists and clinical
laboratory managers to add recognized value to the medical testing services
they provide in their communities.
